TIDMMMC
RNS Number : 8311Y
Management Consulting Group PLC
07 March 2012
7 March 2012
MCG Announces Significantly Improved Results for 2011
Revenue and margin growth and strong cash generation
Management Consulting Group PLC ("MCG" or "the Group"), the
global professional services group, today announces its results for
the year ended 31 December 2011.
Key points
-- Revenue up 12% to GBP302.6m (2010: GBP270.4m)
-- Operating profit up 42% to GBP25.5m (2010: GBP18.0m)
-- Underlying* operating profit up 22% to GBP28.3m (2010: GBP23.3m)
-- Underlying* operating margin higher at 9.4% (2010: 8.6%)
-- Profit for the year increased by 78% to GBP16.4m (2010: GBP9.2m)
-- Cash generated by operations increased by 90% to GBP32.5m (2010: GBP17.1m)
-- Net debt reduced by 48% to GBP28.2m (2010: GBP54.4m)
-- Underlying* EPS up 9% to 3.8p (2010: 3.5p). Basic EPS up 54% to 3.7p (2010: 2.4p)
-- Total dividend increased 67% to 0.75p per share (2010: 0.45p per share)
-- Encouraging levels of business in early 2012
* Throughout this statement the term 'underlying' is defined as
'before non-recurring items and amortisation and impairment of
acquired intangibles for continuing businesses'.
Nick Stagg, Chief Executive, commented
"The Group delivered a strong performance for 2011 with double
digit revenue growth, an increased margin and strong cash
generation. Alexander Proudfoot benefited from an increased
workload for clients in the natural resources sector and Kurt
Salmon has grown revenues in its key markets. We have seen a
resilient performance in our established geographic markets and
growth from emerging markets. Economic uncertainty is unavoidable
in 2012 and we are not immune to its effects on our clients, but
MCG is a global business with a balanced geographic and sector
focus and we are well placed to take advantage of opportunities in
markets and sectors which continue to grow."
For further information please contact:
Management Consulting Group PLC
Nick Stagg Chief Executive 020 7710 5000
Chris Povey Finance Director 020 7710 5000
FTI Consulting (Formerly
Financial Dynamics)
Ben Atwell 020 7831 3113
Susan Quigley 020 7831 3113
An analyst briefing will be held at the offices of FTI
Consulting at Holborn Gate, 26 Southampton Buildings, London WC2A
1PB on 7 March at 9.30am.
Notes to Editors
Management Consulting Group PLC (MMC.L) provides professional
services across a wide range of industries and sectors.
It comprises two independently managed practices: Alexander
Proudfoot and Kurt Salmon. Alexander Proudfoot helps clients to
embed disciplined execution in their operations to achieve growth
targets, revenue and profit goals. Kurt Salmon provides consultancy
services to a wide range of industries in both the private and
public sectors. The Group operates worldwide. For further
information, visit www.mcgplc.com.
Forward looking statements
This preliminary announcement contains certain forward-looking
statements with respect to the financial condition, results of
operations and businesses of Management Consulting Group PLC. These
statements and forecasts involve risk and uncertainty because they
relate to events and depend upon circumstances that will occur in
the future. There are a number of factors that could cause actual
results or developments to differ materially from those expressed
or implied by these forward-looking statements and forecasts. The
forward-looking statements are based on the directors' current
views and information known to them at 7 March 2012. The directors
do not make any undertakings to update or revise any
forward-looking statements, whether as a result of new information,
future events, or otherwise. Nothing in this statement should be
construed as a profit forecast.
Chairman's Statement
2011 was a successful year for Management Consulting Group PLC
("MCG" or "the Group") despite the economic uncertainty in many of
the markets in which we operate.During 2011 we realised some of the
benefits of the changes that were made in 2010. Both Alexander
Proudfoot and Kurt Salmon performed well, resulting in a 12%
increase in revenue and a 22% increase in underlying operating
profit.
Our businesses also generated strong operating cash flows during
2011, which have helped to nearly halve our net debt to GBP28.2m at
the end of the year. The Group also benefited during 2011 from
GBP10.6m of cash proceeds from the exercise of the warrants issued
as part of the capital raising in 2010. We have put in place a new
GBP85m banking facility which runs to July 2016. MCG is in a strong
financial position and we will continue to focus attention on
promoting profitable growth in our business and delivering value to
our shareholders. Recognising this, the Board is proposing to
increase the dividend for the full year by 67% to 0.75 pence per
share, and will continue to maintain a progressive dividend
policy.
MCG operates globally in diverse markets, both in terms of
geographies and industry sectors. A growing proportion of the
Group's revenues are derived from emerging markets, and we are well
placed to take advantage of further opportunities in those markets
that continue to perform strongly, despite uncertainty over the
growth prospects of some developed economies in 2012.
Janet Cohen stepped down from the Board on 19 April 2011, having
served as a director since 2003. Marco Lopinto also stepped down
from the Board on 19 April 2011. Mark Wietecha stood down from the
Board on 30 September 2011 and left the Group to become CEO of the
National Association of Children's Hospitals in the
United States. I would like to thank them for their important contributions to the Group.
Approximately 14% of the Company's shares in issue are held by
directors or employees and about 150 employees now either hold
shares or are in receipt of conditional share awards. We will
continue to seek to align the interests of our senior employees
with those of our shareholders and we are likely to make further
share awards to key employees during 2012.
The success of MCG is built upon our people and the quality of
their efforts to deliver results to our clients. I would like to
take this opportunity to thank everyone who worked for MCG during
2011 for their support and commitment to the Group during the
year.
Alan Barber
Chairman
7th March 2012
Executive Review
MCG has delivered significant growth in both revenue and profit
in 2011, as well as strong operational cash generation. Hopes for
sustained global economic recovery in 2011 receded sharply in the
second half of the year, as it became clear that growth had stalled
in most developed economies. In these testing circumstances both
Alexander Proudfoot and Kurt Salmon made good progress and the
results for the year as a whole are encouraging and demonstrate the
resilience of the two businesses in an uncertain economic
environment.
MCG is now organised as two operating divisions: Alexander
Proudfoot and Kurt Salmon, and from 2011 MCG has reported its
segmental results on these two divisional lines. Kurt Salmon
comprises the former businesses of Ineum Consulting and Kurt Salmon
Associates, which merged with effect from 1 January 2011.
References below to 2010 comparatives for Kurt Salmon represent the
aggregation of the two predecessor businesses.
Through its two operating divisions MCG has a broad balance of
businesses in terms of industries and geographies. MCG's strategy
is to exploit the platform provided by our existing businesses,
which are leaders in their fields, in order to drive organic
revenue and margin growth. We have no current intention to make
further large scale acquisitions, but will look to add capabilities
where appropriate through smaller acquisitions and team hires. We
will focus on opportunities for growth in markets and industry
sectors where we can readily exploit our strengths. The
geographical spread of our businesses and our global office
infrastructure will support an increase in operational
activity.
In addition we are committed to continuing to deliver
efficiencies in the Group's operations and to enhancing financial
discipline across the Group. We seek to align the performance of
employees in each of our businesses with objectives that are
consistent with value creation for our shareholders. Total revenue
for the year ended 31 December 2011 was GBP302.6m, 12% up on the
previous year (2010: GBP270.4m). MCG is a global business and more
than 95% of revenue in 2011 came from projects delivered outside
the UK.
Underlying operating profit in 2011 was up 22%, or GBP5.0m, to
GBP28.3m (2010: GBP23.3m). This reflects the impact of an
impressive overall performance by Alexander Proudfoot after its
strong recovery in the second half of 2010, and a solid performance
throughout the year by Kurt Salmon.
Underlying operating profit for 2011 reflects a charge of
GBP1.7m relating to share awards made to employees (2010: GBP1.3m
credit). During the year 86 senior employees received awards over
approximately 26.7 million shares in total, generally vesting over
three years and conditional upon continued employment. A number of
these awards are also conditional upon share price performance and
the achievement of financial targets. 16.3 million of the share
awards made during the year, should they vest, are required to be
satisfied from existing MCG shares. The Employee Benefit Trust
purchased 4.6 million shares during the year, and held 12.1 million
shares at the year end, for this purpose. 10.4 million of the share
awards made during the year may be satisfied by issuing new MCG
shares.
For 2011 the Group is reporting net non-recurring expenses of
GBP0.2m (2010: GBP2.6m), chiefly comprising income of GBP5.5m
relating to the release of a provision for a potential legal claim,
offset by costs of GBP5.7m principally associated with the
implementation of the Kurt Salmon merger.
The charge for amortisation of acquired intangibles was GBP2.6m
(2010: GBP2.7m). Consequently, the overall profit from operations
increased by 42% to GBP25.5m (2010: GBP18.0m). The net interest
expense decreased to GBP2.3m (2010: GBP3.7m). The profit before tax
was up 62% to GBP23.2m (2010: GBP14.3m).
With an underlying effective tax rate of 36% (2010: 36%)
underlying earnings per share were 3.8p (2010: 3.5p), reflecting
higher underlying earnings for the year offset by the full year
dilutive effect of shares issued in the June 2010 capital raising
and the impact of the conversion of warrants. Basic earnings per
share were 3.7p (2010: 2.4p).
The interim dividend for 2011 of 0.2p per share was paid in
January 2012. The Board is recommending, subject to shareholder
approval, a total dividend for the year of 0.75p per share, up from
0.45p per share in 2010. The Directors therefore recommend, subject
to shareholder approval, a final dividend for 2011 of 0.55p per
share to be paid on 2 July 2012 to shareholders on the register on
18 May 2012. Subject to the Group's financial position, the Board
intends to pursue a progressive dividend policy.
The Group received GBP10.6m during 2011 from the conversion of
warrants issued in the equity raising of June 2010. Cash generated
by operations was GBP32.5m, substantially higher than in the
previous year (2010: GBP17.1m). As a result net debt at the end of
2011 reduced significantly to GBP28.2m (2010: GBP54.4m).
Alexander Proudfoot
Alexander Proudfoot delivers measurable financial benefits to
its clients by developing and installing processes and programmes
to improve operations, helping companies rapidly to improve their
operating performance by increasing revenues and productivity,
reducing costs and generating incremental cash flow. Alexander
Proudfoot differentiates itself from its competitors by working
side-by-side with client management and front-line workers to
implement sustainable changes which deliver improved performance.
Alexander Proudfoot works with clients across a broad range of
sectors and has developed a particularly strong expertise in the
natural resources, financial services and manufacturing industries.
Clients begin to realise the real cash benefits of the changes
implemented during the early stages of the engagement process. The
annualised return on investment that clients obtain from working
with Alexander Proudfoot is typically two to three times the cost
of the project.
Alexander Proudfoot delivered very strong revenue growth in the
second half of 2010 and these increased revenue levels were
sustained throughout 2011. The business has recovered well from the
weakness experienced from mid-2009 into the first half of 2010.
Overall revenues for the year were GBP87.0m, 40% higher than the
previous year (2010: GBP62.2m). Alexander Proudfoot reported
underlying operating profit for the year as a whole of GBP11.6m
(2010: GBP4.9m). The profit margin of 13.3% for the year is
substantially ahead of the 2010 margin of 7.9%, but remains below
the level which has been achieved in the past.
The number of staff employed byAlexander Proudfoot has increased
marginally during the year from 293 at the end of 2010 to 302 at
the end of 2011. Alexander Proudfoot operates a flexible global
staffing model and employee numbers were significantly higher at
times during 2011 to meet the requirements of client projects.
During 2011 Alexander Proudfoot was organised on the basis of
four business units, based in Europe, the United States, South
Africa and Brazil. The business is headquartered in Atlanta in the
United States and during 2011 had further office locations in
London, Paris, Frankfurt, Johannesburg, Toronto and Sao Paulo.
Alexander Proudfoot serves clients globally from these
locations.
Most of the Alexander Proudfoot business units reported
increased revenues in 2011. The strongest year-on-year revenue
growth was delivered in the European and African business units.
The Brazilian business unit showed strong growth in the first half
and delivered a satisfactory performance for the year as a whole.
The recovery in the North American business developed more slowly
during 2011 and this unit reportedrevenue broadly in line with the
previous year. The management team in the North American business
unit was strengthened in the second half of the year and recent
indicators suggest that the changes made are now delivering
results.
During 2011 Alexander Proudfoot saw good ongoing demand from
clients in the natural resources sector and growth in revenues from
projects delivered in emerging markets, in particular in Africa and
Latin America. In 2011 there was a trend for work sold in Europe
and North America to be delivered elsewhere, for example, in
Nigeria, Russia and Peru. Projects won during 2011 in the natural
resources sector and in emerging markets were typically larger than
those in previous years, although the sometimes remote and
challenging project locations generally had higher delivery costs
and this had an impact on profit margins in some cases. The
incidence of these larger projects, and therefore revenues, was
slightly skewed towards the first half of the year, but this was
not a function of any inherent seasonality.
Alexander Proudfoot has demonstrated over many years that it has
an offering that produces very attractive returns for its clients.
It performed well during 2011, taking advantage of the
opportunities provided by the pressure on producers in the natural
resources sector to improve productivity and efficiency in
extraction and processing. This success reflects Alexander
Proudfoot's strong capabilities in natural resources and
management's strategy to focus effort and resources on this sector.
As global demand for commodities remains strong there are
opportunities for further growth.
Alexander Proudfoot's clients are generally large international
organisations and, whilst the business does not necessarily produce
a regular cycle of recurring work with the same client, many
clients do commission further work at some stage and most act as
references for sales to other customers. Management is continuing
to work to enhance sales processes across the business, increasing
the focus on building long term relationships with existing and
prospective clients as well as driving individual project sales.
The business has a global reach and a flexible capability, and is
well placed to take advantage of opportunities in markets and
industry sectors where economic growth remains strong.
The order intake in the latter part of the 2011 financial year
provided an encouraging starting point for 2012. The current order
book for Alexander Proudfoot is at a higher level than the average
during 2009 and 2010, providing some visibility on revenues into
the second quarter of 2012. The pipeline of prospects is also
encouraging at this stage of the year.
Kurt Salmon
Kurt Salmon was established on 1 January 2011 from the merger of
Ineum Consulting and Kurt Salmon Associates. Prior to that date
both were managed and reported as separate business segments.
References below to 2010 comparatives represent a pro forma
aggregation of Ineum Consulting and Kurt Salmon Associates. Kurt
Salmon is a global management consultancy business whichpartners
with its clients to drive strategies and solutions that make a
lasting and meaningful impact on their businesses. Kurt Salmon
operates internationally in certain key industry verticals and has
a particular focus in retail and consumer products and in financial
services. In addition it has a number of strong regional practices,
for example in healthcare in the United States and in the public
sector in France. Kurt Salmon also provides functional expertise to
its clients, for example, through offerings focused on Chief
Financial Officers and Chief Information Officers. Kurt Salmon now
operates in 15 countries around the world, the largest operations
being in North America and Continental Europe.
In October 2011 MCG acquired Vertical Retail Consulting, a
successful retail consulting business operating in mainland China,
Hong Kong and elsewhere in Asia, for an initial consideration of
US$2.25m. The acquisition brings an established team of partners
and consultants serving both well known international brands
already active in or in the process of entering the Chinese market,
and local retailers which are expanding rapidly in terms of store
and brand development. The acquired business generated revenues of
approximately GBP3.2m in the 12 months to 31 December 2011, of
which GBP0.8m is reflected in MCG's reported results for the year.
It is performing well and has a strong order book and sales
pipeline which extends into the second half of 2012. Kurt Salmon
has a successful existing business operating in Japan and as a
result of the acquisition it has significantly enhanced its
capabilities in fast growing retail markets in Asia.
Kurt Salmon delivered a good result for the year as a whole. It
reported an overall increase in revenues, building on its strong
position in its core markets, while exploring new opportunities
such as the acquisition in China. The business reported some
reduction in profit margins as a result of the impact of the charge
to the profit and loss account of share awards made to senior Kurt
Salmon staff during 2011, and a slightly weaker profit performance
in the second half of the year reflecting the impact of continuing
investment. Overall revenues for the year were GBP215.6m, 4% higher
than the previous year (2010: GBP208.2m). Kurt Salmon reported
underlying operating profit for the year of GBP16.8m (2010:
GBP18.4m) and an underlying operating margin of 7.8% (2010:
8.8%).
The number of staff employed by Kurt Salmon has increased during
the year from 1,362 at the end of 2010 to 1,420 at the end of 2011.
During 2011 focused recruitment in higher growth sectors and
geographies within the business was offset by some restructuring
and reduction in staff levels in other areas.
Kurt Salmon is organised on the basis of geographic locations
and global industry verticals. Kurt Salmon has its headquarters
operations in Paris and New York, with offices across Continental
Europe, in London and in the
United States. In Asia, Kurt Salmon has offices in Tokyo, Shanghai and Hong Kong.
Kurt Salmon's continental European operations, centred on
France, together with Germany and the Benelux countries, had a
successful year and all reported revenue growth. The Kurt Salmon
retail consulting business in the UK performed well, but the
results of some of the other smaller elements of the UK operations
were unsatisfactory, in a consulting market which remains difficult
and competitive. In North America the core retail and consumer
goods practice delivered revenue and profit growth. The US
financial services practice continued to show good progress. The US
healthcare practice had a more difficult year than had been
anticipated, although management have now taken steps to improve
growth prospects and profitability in 2012. The Kurt Salmon
operation in Japan suffered badly in the aftermath of the natural
disasters of March 2011, but recovered very strongly in the second
half of the year.
The order intake in Kurt Salmon slowed a little in the second
half of 2011 but recovered towards the end of the year. The North
American business has made a good start to 2012 and the prospects
are encouraging. The European businesses have started the 2012 year
against the backdrop of continuing uncertainty on the future of and
economic prospects for the Eurozone, which has had some impact on
client buying decisions. The current order book for Kurt Salmon is
at a higher level than the average during 2009 or 2010 and the
pipeline of prospects is promising. The outlook in Europe remains
uncertain, but Kurt Salmon has no exposure to the weaker peripheral
Eurozone countries and is in a strong position in its largest
market in France.
The decision taken in 2010 to bring together Ineum Consulting
and Kurt Salmon Associates, as Kurt Salmon, has proved a success.
The complementary industry and geographic focus has provided an
opportunity to develop a unified practice that is a stronger
competitor in the market and is better able to attract new talent.
The merger resulted in some non-recurring expenses in 2011, related
to branding, office restructuring and some systems and personnel
changes. Kurt Salmon is an established global consulting brand with
a long heritage and it is well placed to develop as a significant
player in the consulting market in the industry and functional
areas where its expertise is focused. The business has scope for
organic growth in markets where it is already established and will
look to build its presence in markets where it currently lacks
scale. Alongside investment for growth, the management of Kurt
Salmon will continue to work to improve operational efficiencies
and processes in the business to enhance the underlying profit
margin.
Summary and outlook
2011 was a year of good overall progress for the Group, building
on the significant changes made during the previous financial year.
The first half saw some signs of recovery in many markets but
concern over weaker economic growth indicators in many developed
economies affected business confidence in the second half. MCG has
delivered healthy revenue growth, a significant improvement in
profit before tax, and strong cash generation delivering a further
substantial reduction in net debt.
Whilst the current macroeconomic uncertainty in the Eurozone
provides an unhelpful backdrop for some parts of our business, our
European operations are focused on France and Germany, which remain
robust economies where demand for consulting services remains
healthy, and we have no exposure to weaker markets in Southern
Europe. Changes in exchange rates had little impact overall on our
reported results in 2011, but exchange rate movements can affect
MCG's reported results in Sterling, since most of the Group's
revenues and costs are denominated in other currencies, principally
in Euros and US Dollars.
MCG has a strong position in its key European markets, and an
established position and brand in North America where economic
growth is continuing. European markets may see weak growth in 2012
but we are well placed to exploit opportunities for growth in
geographies and sectors where economic prospects are more
favourable, particularly in emerging markets. The reported
segmental results reflect the locations from which work is sold,
but MCG is a global business and we deliver our services where our
clients require. Approximately 18% of our 2011 revenues were
derived from projects delivered outside the developed economies of
North America and Western Europe. The acquisition by Kurt Salmon of
a retail consulting practice in China in October 2011 is evidence
of the Group's continuing focus on opportunities in fast growing
emerging markets.
We entered 2012 with a solid order book position in both our
businesses and an encouraging pipeline of prospects. We have a
strong balance sheet, a focused team and a clear strategy to
deliver value to our shareholders.
Group income statement
2011 2010
Note GBP'000 GBP'000
----------------------------------------------- ---- --------- ---------
Continuing operations
Revenue 4 302,559 270,426
Cost of sales (198,128) (178,354)
----------------------------------------------- ---- --------- ---------
Gross profit 104,431 92,072
----------------------------------------------- ---- --------- ---------
Administrative expenses - underlying (76,084) (68,804)
----------------------------------------------- ---- --------- ---------
Profit from operations - underlying 28,347 23,268
Administrative expenses - non--recurring
other (net) (247) (2,569)
----------------------------------------------- ---- --------- ---------
Profit from operations before amortisation
of acquired intangibles 28,100 20,699
Administrative expenses - amortisation
of acquired intangibles (2,642) (2,701)
----------------------------------------------- ---- --------- ---------
Total administrative expenses (78,973) (74,074)
----------------------------------------------- ---- --------- ---------
Profit from operations 4 25,458 17,998
Investment revenues 8 99 132
Finance costs 8 (2,406) (3,802)
----------------------------------------------- ---- --------- ---------
Profit before tax 23,151 14,328
Tax 9 (6,720) (5,097)
----------------------------------------------- ---- --------- ---------
Profit for the year from continuing operations 16,431 9,231
Profit for the year attributable to owners
of the company 16,431 9,231
----------------------------------------------- ---- --------- ---------
Earnings per share - pence
From profit for the year attributable
to owners of the company
Basic and diluted 10 3.7 2.4
Basic - underlying 10 3.8 3.5
Diluted - underlying 10 3.7 3.4
-------------------------------------- --- ---
Group statement of comprehensive income
2011 2010
Note GBP'000 GBP'000
---------------------------------------------------- ----- ------- -------
Exchange differences on translation of
foreign operations (3,789) (4,096)
Actuarial losses on defined benefit post-retirement
obligations (1,881) (3,362)
(Loss)/Gain on available for sale investments (183) 309
Deferred tax (144) 1,627
----------------------------------------------------------- ------- -------
Other comprehensive expense for the period (5,997) (5,522)
Profit for the period 16,431 9,231
----------------------------------------------------------- ------- -------
Total comprehensive income the period attributable
to owners of the company 10,434 3,709
----------------------------------------------------------- ------- -------
Group statement in changes of equity
Shares
Share held
Share Share Merger compensation by employee Translation Other Retained
benefits
capital premium reserve reserve trust reserve reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- -------- -------- -------- ------------ ----------- ----------- -------- ---------- ---------
Balance at
1 January
2011 83,997 71,390 32,513 2,386 (2,354) 32,829 6,412 (51,398) 175,775
--------------- -------- -------- -------- ------------ ----------- ----------- -------- ---------- ---------
Profit for the
period - - - - - - - 16,431 16,431
Exchange
differences - - - - - (3,789) - - (3,789)
Actuarial
movements - - - - - - - (1,881) (1,881)
Loss on AFS
investments - - - - - - (183) - (183)
Tax on equity
items 34 34
Tax on items
recognised
in Group
statement
of
comprehensive
income - - - - - - - (144) (144)
Share based
payments - - - 1,002 - - - - 1,002
Shares issued 507 10,650 - - - - - - 11,157
Shares
acquired
by employee
benefits
trust - - - - (1,647) - - - (1,647)
Shares
transferred
from employee
benefits
trust - - - - 262 - - - 262
Dividends - - - - - - - (2,279) (2,279)
--------------- -------- -------- -------- ------------ ----------- ----------- -------- ---------- ---------
Balance at
31 December
2011 84,504 82,040 32,513 3,388 (3,739) 29,040 6,229 (39,237) 194,738
--------------- -------- -------- -------- ------------ ----------- ----------- -------- ---------- ---------
Balance at
1 January
2010 82,848 48,981 32,513 2,216 (1,153) 36,925 6,103 (56,921) 151,512
--------------- -------- -------- -------- ------------ ----------- ----------- -------- ---------- ---------
Profit for the
period - - - - - - - 9,231 9,231
Exchange
differences - - - - - (4,096) - - (4,096)
Actuarial
movements - - - - - - - (3,362) (3,362)
Profit on AFS
investments - - - - - - 309 - 309
Tax on equity
items - - - - - - - 114 114
Tax on items
recognised
in Group
statement
of
comprehensive
income - - - - - - - 1,627 1,627
Share based
payments - - - (1,260) - - - - (1,260)
Transfer on
nil
vesting - - - 1,430 - - - (1,430) -
Shares issued 1,149 24,144 - - - - - - 25,293
Share issue
expenses - (1,735) - - - - - - (1,735)
Shares
acquired
by employee
benefits
trust - - - - (1,475) - - - (1,475)
Shares
transferred
from employee
benefits
trust - - - - 274 - - - 274
Dividends - - - - - - - (657) (657)
--------------- -------- -------- -------- ------------ ----------- ----------- -------- ---------- ---------
Balance at
31 December
2010 83,997 71,390 32,513 2,386 (2,354) 32,829 6,412 (51,398) 175,775
--------------- -------- -------- -------- ------------ ----------- ----------- -------- ---------- ---------
Group balance sheet
2011 2010
Note GBP'000 GBP'000
--------------------------------------- ----- --------- ---------
Non--current assets
Intangible assets 274,275 276,923
Property, plant and equipment 3,061 2,846
Investments 2,856 3,183
Deferred tax assets 18,636 19,078
---------------------------------------------- --------- ---------
Total non--current assets 298,828 302,030
---------------------------------------------- --------- ---------
Current assets
Trade and other receivables 72,875 76,589
Cash and cash equivalents 19,762 25,710
---------------------------------------------- --------- ---------
Total current assets 92,637 102,299
---------------------------------------------- --------- ---------
Total assets 391,465 404,329
---------------------------------------------- --------- ---------
Current liabilities
Financial liabilities - (39,059)
Trade and other payables (97,695) (94,772)
Current tax liabilities (15,066) (12,630)
---------------------------------------------- --------- ---------
Total current liabilities (112,761) (146,461)
---------------------------------------------- --------- ---------
Net current liabilities (20,124) (44,162)
---------------------------------------------- --------- ---------
Non--current liabilities
Financial liabilities (47,921) (41,050)
Retirement benefit obligations (23,174) (25,705)
Non--current tax liabilities (5,256) (7,040)
Long-term provisions (7,615) (8,298)
---------------------------------------------- --------- ---------
Total non--current liabilities (83,966) (82,093)
---------------------------------------------- --------- ---------
Total liabilities (196,727) (228,554)
---------------------------------------------- --------- ---------
Net assets 194,738 175,775
---------------------------------------------- --------- ---------
Equity
Share capital 84,504 83,997
Share premium account 82,040 71,390
Merger reserve 32,513 32,513
Share compensation reserve 3,388 2,386
Shares held by employee benefits trust (3,739) (2,354)
Translation reserve 29,040 32,829
Other reserves 6,229 6,412
Retained earnings (39,237) (51,398)
---------------------------------------------- --------- ---------
Total equity attributable to owners of
the company 194,738 175,775
---------------------------------------------- --------- ---------
Group cash flow statement
2011 2010
Note GBP'000 GBP'000
------------------------------------------- ---- -------- --------
Net cash inflow from operating activities 11 26,278 10,426
------------------------------------------- ---- -------- --------
Investing activities
Interest received 99 132
Purchases of property, plant and equipment (1,084) (471)
Purchases of intangible assets (1,523) (1,592)
Proceeds on disposal of fixed assets - 68
Purchase of financial assets (70) (21)
Proceeds on disposal of investments 89 214
Acquisition of subsidiaries (1,455) -
------------------------------------------- ---- -------- --------
Net cash used in investing activities (3,944) (1,670)
------------------------------------------- ---- -------- --------
Financing activities
Interest paid (2,632) (2,554)
Dividends paid (1,999) -
Proceeds from borrowings 19,045 18,966
Repayment of borrowings (50,589) (48,545)
Proceeds on issue of shares 10,572 23,559
Share buy back (1,634) -
Net cash used in financing activities (27,237) (8,574)
------------------------------------------- ---- -------- --------
Net (decrease)/increase in cash and cash
equivalents (4,903) 182
Cash and cash equivalents at beginning
of year 25,710 23,965
Effect of foreign exchange rate changes (1,045) 1,563
------------------------------------------- ---- -------- --------
Cash and cash equivalents at end of year 19,762 25,710
------------------------------------------- ---- -------- --------
Notes
1. Basis of preparation
The financial information included in this statement does not
constitute the company's statutory accounts for the years ended 31
December 2011 or 2010, but is derived from those accounts.
Statutory accounts for 2010 have been delivered to the Registrar of
Companies and those for 2011 will be delivered following the
company's annual general meeting. The auditor has reported on those
accounts; their reports were unqualified, did not draw attention to
any matters by way of emphasis without qualifying their reports and
did not contain statements under Section 498 Companies Act
2006.
While the financial information included in this preliminary
announcement has been computed in accordance with International
Financial Reporting Standards (IFRS), this announcement does not
itself contain sufficient information to comply with IFRS.
The Group's Annual Report and Accounts and notice of Annual
General Meeting will be sent to shareholders on 16 March 2012 and
will be available at the Company's registered office at 10 Fleet
Place, London, EC4M 7RB, United Kingdom and on our website:
www.mcgplc.com.
The Annual General Meeting will be held at 1.30pm on 19 April
2012 at the offices of Baker & McKenzie LLP, 100 New Bridge
Street, London, EC4V 6JA.
2. Accounting policies
The financial information has been prepared in accordance with
IFRS. These financial statements have been prepared in accordance
with those IFRS standards and IFRIC interpretations issued and
effective or issued and early adopted as at the time of preparing
these statements (as at 31 December 2011). The policies have been
consistently applied to all the periods presented.
Full details of the Group's accounting policies can be found in
note 2 to the 2010 Annual Report which is available on our website:
www.mcgplc.com.
3. Going concern
In December 2011 the Group put in place a new borrowing
facility, which runs until July 2016. The new facility is a fully
revolving credit facility under which the Group can draw up to
GBP85 million. The Group prepares regular business forecasts and
monitors its projected compliance with its banking covenants, which
are reviewed by the Board. Forecasts are adjusted for reasonable
sensitivities which address the principal risks to which the Group
is exposed. Consideration is given to the potential actions
available to management to mitigate the impact of one or more of
these sensitivities, in particular the discretionary nature of a
significant amount of cost incurred by the Group. On this basis the
Board has concluded that it is appropriate to continue to adopt the
going concern basis in the Group's financial statements.
4. Segmental information
The Group's operating segments are defined as the two
professional services practices, Alexander Proudfoot and Kurt
Salmon. Kurt Salmon was formed from the merger of Ineum Consulting
and Kurt Salmon Associates with effect from 1 January 2011. 2010
comparatives represent the aggregation of Ineum Consulting and Kurt
Salmon Associates. This is the basis on which information is
provided to the Board of Directors for the purposes of allocating
certain resources within the Group and assessing the performance of
the business. All revenues are derived from the provision of
professional services.
Inter-segmental sales are not significant.
(a) Geographical analysis
The Group operates in three geographical areas; the Americas,
Europe and the Rest of World. The following is an analysis of
financial information by geographic segment:
(i) Revenue and underlying operating profit by geography
Rest of
Americas Europe World Group
-------------------------------------------- -------- ------- ------- -------
Year ended 31 December 2011 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------- -------- ------- ------- -------
Revenue - continuing operations 97,462 179,167 25,930 302,559
Profit from operations before non-recurring
expenses and amortisation of acquired
intangibles 7,174 17,779 3,394 28,347
Non-recurring expenses and amortisation
of acquired intangibles (2,116) (639) (134) (2,889)
-------------------------------------------- -------- ------- ------- -------
Profit from operations 5,058 17,140 3,260 25,458
-------------------------------------------- -------- ------- ------- -------
Investment income 99
Finance costs (2,406)
-------------------------------------------- -------- ------- ------- -------
Profit before tax 23,151
-------------------------------------------- -------- ------- ------- -------
Rest of
Americas Europe World Group
-------------------------------------------- -------- ------- ------- -------
Year ended 31 December 2010 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------- -------- ------- ------- -------
Revenue - continuing operations 96,480 158,819 15,127 270,426
Profit from operations before non-recurring
expenses and amortisation of acquired
intangibles 8,596 12,820 1,852 23,268
Non-recurring expenses and amortisation
of acquired intangibles (1,619) (3,553) (98) (5,270)
-------------------------------------------- -------- ------- ------- -------
Profit from operations 6,977 9,267 1,754 17,998
-------------------------------------------- -------- ------- ------- -------
Investment income 132
Finance costs (3,802)
-------------------------------------------- -------- ------- ------- -------
Profit before tax 14,328
-------------------------------------------- -------- ------- ------- -------
The revenue and underlying profit for Europe includes the
Group's operations in the UK, which represented less than 5% of
total Group revenue in 2011 (2010: 8%).
(ii) Net assets by geography
Rest of
Americas Europe World Group
At 31 December 2011 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- -------- -------- ---------
Assets
Intangibles, including goodwill 116,435 153,729 4,111 274,275
Other segment assets 45,376 58,774 4,972 109,122
---------------------------------- -------- -------- -------- ---------
161,811 212,503 9,083 383,397
Unallocated corporate assets 8,068
---------------------------------- -------- -------- -------- ---------
Consolidated total assets 391,465
---------------------------------- -------- -------- -------- ---------
Liabilities
Segment liabilities (92,092) (88,575) (9,061) (189,728)
Unallocated corporate liabilities (6,999)
---------------------------------- -------- -------- -------- ---------
Consolidated total liabilities (196,727)
---------------------------------- -------- -------- -------- ---------
Net assets 194,738
---------------------------------- -------- -------- -------- ---------
Rest of
Americas Europe World Group
At 31 December 2010 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- --------- -------- ---------
Assets
Intangibles, including goodwill 117,016 159,906 - 276,922
Other segment assets 41,290 72,760 9,463 123,513
---------------------------------- -------- --------- -------- ---------
158,306 232,666 9,463 400,435
Unallocated corporate assets 3,894
---------------------------------- -------- --------- -------- ---------
Consolidated total assets 404,329
---------------------------------- -------- --------- -------- ---------
Liabilities
Segment liabilities (99,139) (108,489) (6,636) (214,264)
Unallocated corporate liabilities (14,290)
---------------------------------- -------- --------- -------- ---------
Consolidated total liabilities (228,554)
---------------------------------- -------- --------- -------- ---------
Net assets 175,775
---------------------------------- -------- --------- -------- ---------
(iii) Capital additions, depreciation and amortisation by
geography
Rest of
Americas Europe World Group
Year ended 31 December 2011 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -------- ------- ------- -------
Capital additions 1,526 981 97 2,604
Unallocated corporate additions 28
-------------------------------- -------- ------- ------- -------
Total capital additions 2,632
-------------------------------- -------- ------- ------- -------
Depreciation and amortisation 2,218 2,290 63 4,571
-------------------------------- -------- ------- ------- -------
Rest of
Americas Europe World Group
Year ended 31 December 2010 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -------- ------- ------- -------
Capital additions 808 1,208 8 2,024
Unallocated corporate additions 23
-------------------------------- -------- ------- ------- -------
Total capital additions 2,047
-------------------------------- -------- ------- ------- -------
Depreciation and amortisation 2,314 3,346 60 5,720
-------------------------------- -------- ------- ------- -------
(b) Revenue and underlying operating profit by operating
segment
The two (2010: three) operating segments are combined into one
reportable segment owing to similar underlying economic
characteristics across the practices. Not all significant
non-recurring items and financial items can be allocated to the
practices and are therefore disclosed for the reportable segment as
a whole. Assets and liabilities by practice are not reviewed by the
Board and are therefore not disclosed.
Alexander
Proudfoot Kurt Salmon Total
----------------------------------------- ----------- ------------- ---------
Year ended 31 December 2011 GBP'000 GBP'000 GBP'000
----------------------------------------- ----------- ------------- ---------
Revenue - continuing operations 86,968 215,591 302,559
----------------------------------------- ----------- ------------- ---------
Underlying operating profit 11,589 16,758 28,347
Non-recurring expenses and amortisation
of acquired intangibles (2,889)
----------------------------------------- ----------- ------------- ---------
Profit from operations 25,458
Investment income 99
Finance costs (2,406)
----------------------------------------- ----------- ------------- ---------
Profit before tax 23,151
----------------------------------------- ----------- ------------- ---------
Alexander Ineum Kurt Salmon Kurt Salmon
Proudfoot Consulting Associates Total
--------------------------------- ----------- ------------ ------------ ----------- ---------
Year ended 31 December 2010 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ----------- ------------ ------------ ----------- ---------
Revenue - continuing operations 62,252 128,884 79,290 208,174 270,426
--------------------------------- ----------- ------------ ------------ ----------- ---------
Underlying operating profit 4,898 9,188 9,182 18,370 23,268
Non-recurring expenses and
amortisation of acquired
intangibles (5,270)
--------------------------------- ----------- ------------ ------------ ----------- ---------
Profit from operations 17,998
Investment income 132
Finance costs (3,802)
--------------------------------- ----------- ------------ ------------ ----------- ---------
Profit before tax 14,328
--------------------------------- ----------- ------------ ------------ ----------- ---------
5. Profit before tax
Profit before tax has been arrived at after (crediting)/charging
the following:
2011 2010
Note GBP'000 GBP'000
---------------------------------------------- ---- ------- -------
Net foreign exchange (gains) / losses (48) 112
Amortisation of intangible assets 3,754 4,198
Depreciation of property, plant and equipment 817 1,521
(Gain) / loss on disposal of fixed assets (56) 19
Non--recurring items 247 2,569
Staff costs 7 182,748 166,552
---------------------------------------------- ---- ------- -------
Non- recurring items in 2011 comprise GBP4.4m in relation to
Kurt Salmon merger expenses (2010: GBP2.3m), GBP1.1m in relation to
property costs (2010: GBP2.2m), GBP0.2m of acquisition related
costs (2010: nil) and a GBP5.5m release in respect of a legal claim
(2010: GBP3.0m). 2010 also included GBP1.1m in relation to
redundancy and related expenses.
6. Dividends
2011 2010
GBP'000 GBP'000
------------------------------------------------ ------- -------
Amounts recognised as distributions to equity
holders in the year
Final dividend for the year ended 31 December
2010 of 0.30p per share (2009: nil) 1,317 -
Interim dividend for the year ended 31 December
2011 of 0.20p (2010: 0.15p) per share 962 657
------------------------------------------------ ------- -------
2,279 657
------------------------------------------------ ------- -------
Dividends are not payable on shares held in the employee share
trust which has waived its entitlement to dividends. The amount of
the dividend waived in 2011 (in respect of the interim dividend for
the year ended 31 December 2011) was GBP25,046 (2010:
GBP12,491).
The 2010 final dividend of 0.30p per share was paid on 6 July
2011.
The 2011 interim dividend of 0.20p per share was paid on 6
January 2012. The directors propose a final dividend of 0.55p per
share for the year ended 31 December 2011.
7. Staff numbers and costs
The average number of persons employed by the Group (including
executive directors) during the year, analyzed by category, was as
follows:
2011 2010
Number Number
-------------------- ------- -------
Sales and marketing 102 96
Consultants 1,400 1,335
Support staff 244 253
-------------------- ------- -------
1,746 1,684
-------------------- ------- -------
The number of Group employees at the yearend was 1,741 (2010:
1,678).
The aggregate payroll costs of these persons were as
follows:
2011 2010
GBP'000 GBP'000
---------------------- ------- -------
Wages and salaries 147,589 132,348
Social security costs 30,950 30,746
Other pension costs 4,209 3,458
---------------------- ------- -------
182,748 166,552
---------------------- ------- -------
8. Investment revenues and finance costs
Investment revenues 2011 2010
GBP'000 GBP'000
Interest receivable on bank deposits and
similar income 99 132
------------------------------------------ -------- ---------
Finance costs 2011 2010
GBP'000 GBP'000
------------------------------------------ ------- -------
Interest payable on bank overdrafts and
loans and similar charges (2,193) (3,468)
Finance costs on retirement benefit plans (213) (334)
------------------------------------------ ------- -------
(2,406) (3,802)
------------------------------------------ ------- -------
9. Tax
2011 2010
GBP'000 GBP'000
------------------------------------------------- ------- -------
Tax in respect of current year
Foreign tax 12,016 7,323
------------------------------------------------- ------- -------
Deferred tax - acquired intangible assets (767) 122
Deferred tax - temporary differences and other 328 (1,800)
Deferred tax - tax losses (362) 1,593
Deferred tax - US goodwill 264 270
------------------------------------------------- ------- -------
Total deferred tax (537) 185
------------------------------------------------- ------- -------
Total current year tax 11,479 7,508
Prior year current taxation (2,057) (1,308)
------------------------------------------------- ------- -------
Total tax expense on underlying profit 9,422 6,200
Tax in respect of items excluded from underlying
profit:
Foreign tax (1,742) (763)
Deferred tax - temporary differences and other (960) (340)
------------------------------------------------- ------- -------
Total tax expense 6,720 5,097
------------------------------------------------- ------- -------
UK corporation tax is calculated at 26.5% (2010: 28%) of the
estimated assessable profit for the year. Taxation for other
jurisdictions is calculated at the rates prevailing in the
respective jurisdictions.
10. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
2011 2010
Earnings GBP'000 GBP'000
------------------------------------------------------- --------- ---------
Earnings for the purposes of basic earnings per
share and diluted earnings per share being net
profit attributable to equity holders of the parent 16,431 9,231
Non--recurring items 247 2,569
Amortisation of acquired intangibles 2,642 2,701
Taxation on non-recurring items and amortisation
of acquired intangibles (2,702) (1,103)
Earnings for the purpose of basic earnings per
share excluding non--recurring items and amortisation
of acquired intangibles 16,618 13,398
------------------------------------------------------- --------- ---------
Number Number
Number of shares (million) (million)
------------------------------------------------------- --------- ---------
Weighted average number of ordinary shares for
the purposes of basic earnings per share, and
basic excluding non--recurring items and amortisation
of acquired intangibles 441.5 384.4
Effect of dilutive potential ordinary shares:
- warrants and performance share plan 8.3 5.0
------------------------------------------------------- --------- ---------
Weighted average number of ordinary shares for
the purposes of diluted earnings per share 449.8 389.4
------------------------------------------------------- --------- ---------
Pence Pence
------------------------------------------------------- ----- ------
Basic and diluted earnings per share attributable
to owners of the company 3.7 2.4
Basic earnings per share - excluding non--recurring
items and amortisation of acquired intangibles 3.8 3.5
Diluted earnings per share - excluding non--recurring
items and amortisation of acquired intangibles 3.7 3.4
------------------------------------------------------- ----- ------
The average share price for the year ended 31 December 2011 was
35.5p (2010: 23.4p).
11. Notes to the cash flow statement
2011 2010
GBP'000 GBP'000
------------------------------------------------- ------- -------
Profit from operations 25,458 17,998
Adjustments for:
Depreciation of property, plant and equipment 817 1,521
Amortisation of intangible assets 3,754 4,198
(Profit)/loss on disposal of plant and equipment (56) 19
*Adjustment for pension funding (2,789) -
Adjustment for share awards 1,719 (1,260)
Other non cash movements (1,221) (1,389)
(Decrease)/increase in provisions (629) 2,250
------------------------------------------------- ------- -------
Operating cash flows before movements in working
capital 27,053 23,337
(Increase)/decrease in receivables (430) 1,530
Increase/(decrease) in payables 5,879 (7,761)
------------------------------------------------- ------- -------
Cash generated by operations 32,502 17,106
Income taxes paid (6,224) (6,680)
------------------------------------------------- ------- -------
Net cash inflow from operating activities 26,278 10,426
------------------------------------------------- ------- -------
*The adjustment for pension funding represents additional cash
contributions made to the Group's closed US defined benefit pension
scheme to maintain the funding position at the required level.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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